Russian innovators pursue prototype to prevent piracy

Dmitry Shuvaev, Andrei Klimenko and Alexei Klimenko (L-R) came up with a way to cope with infringement of intellectual property. It remains to be seen whether they succeed. Source: Press Photo

The creators of Pirate Pay, a Perm-based start-up, say they can stop files from being illegally downloaded from torrent networks.

In 2009, brothers Andrei and Alexei Klimenko and their
friend Dmitry Shuvaev created a file-sharing traffic management solution for an
internet service provider (I.S.P.) network. Shortly thereafter, the three
20-something colleagues realized that the application they created had some
unintended but potentially significant opportunities for intellectual property
protection.

Dmitry Shuvaev's profile

Title: Development Director

Age: 27

Studied: Management

Dmitry completed his studies at the
Perm branch of Moscow’s Higher School of Economics in 2004, specializing
in developing I.T. startups with an intention to sell them to major
companies later. He later worked with a commercial design studio and a telecom company.

“After creating the prototype, we realized we could more generally prevent
files from being downloaded, which meant that the program had great promise in
combating the spread of pirated content,” said Andrei Klimenko, now the C.E.O.
of the company the founders named Pirate Pay.

The technology prevents file sharing in torrent networks. These peer-to-peer
(p2p) file sharing solutions allow large amounts of data to be transferred
between individuals. After the first user uploads a file to an accessible
network, the file does not live in any central location, but is accessible only
from people who have already accessed it. In order to download a file, however,
these secondary users must know the I.P. address of a computer that has the
file. Without the information, the connection terminates and the file cannot be
downloaded. Shuvaev and the Klimenko brothers found a way to prevent these
secondary downloads from taking place even when the I.P. address is known.

“It was not so hard to do from inside an I.S.P.’s network. But to turn the
technology into global service, we had to convince all I.S.P.s to acquire our
solution. This is, what someone could call, mission impossible. So to create a
global service, we had to find the way to do it from the cloud,” Andrei
Klimenko said, “So we needed money for development.”

Alexei Klimenko's profile

Title: Founder, C.T.O.

Age: 28

Studied: Physics

After earning a degree in physics at Perm State University, Alexei worked as an engineer before working in sales and management in the local telecom sector. Before Pirate Pay, he was involved with implementing over-the-top services for telecom clients.

The partners quickly found that obtaining the financial support needed to
refine the technology into a successful venture was not a simple task, but
after taking part in many grant competitions, their efforts have begun to pay
off. The Microsoft Seed Financing Fund has invested $100,000 dollars, the
Bortnik Fund, which assists small innovative enterprises, contributed
approximately $34,000. And, perhaps most significantly, the Skolkovo Innovation
Center accepted the company as a resident, which will result in certain tax
benefits as well as interaction with other innovators. The newly minted
businessmen have been able to recruit four programmers, expanding their staff
to seven people.

“The underlying technology of Pirate Pay has no analogues in the world,” said
Alexander Turkot, executive director of the Skolkovo Information Technologies
Cluster, explaining the decision to accept the company as a resident. Potential
residents at Skolkovo, Russia’s government-supported answer to Silicon Valley,
are assessed according to several criteria, including scientific innovation and
the prospect of commercialization.

A solution for a pressing problem

The problem of copyright infringement in Russia is extremely serious, and there
is significant international pressure on the government to crack down on what
is seen to be rampant piracy. Foreigners in Russia find they can obtain foreign
films before their release dates in the United States. According to various
estimates, filmmakers lose about $500 million a year to piracy. Hundreds of
thousands of gigabytes of illegal content are downloaded every day through file
sharing services, including computer software, music and films.

Threatening Internet users with legal liability or appealing to their
conscience has largely failed. And that is why the company has begun to attract
attention outside Russia as well as at home.

In December 2011 the film “Vysotsky. Thanks to God I’m Alive” came out in movie
theaters, and for a month after its opening, Pirate Pay protected the film on
torrent networks.

Andrei Klimenko's profile

Title: Founder, C.E.O.

Age: 29

Studied: Physics

Andrei was a physics teacher before joining a Perm-based telecom company as a sales manager in 2002. Three years later, he launched Perm’s first network of Wi-Fi hotspots. He also founded another local successful start-up before launching Pirate Pay.

“We used a number of servers to make a connection to each and every p2p client
that distributed this film. Then Pirate Pay sent specific traffic to confuse
these clients about the real I.P. addresses of other clients and to make them
disconnect from each other,” Andrei Klimenko said. “Not all the goals were
reached. But nearly 50,000 users did not complete their downloads.”

This company’s successful defense of the film brought in its first big payday.
Company officials will not discuss exact earnings, but said that projects will
cost clients between approximately $12,000 and $50,000 depending on the
resources needed to mount a defense.

“We try to conduct deals with a profit margin,” said Andrei Klimenko. “However,
significantly more is currently being spent on development than what we are
earning, and thus there is not yet an opportunity to recoup our expenses from
revenue.”

In the next two years, the company plans to consolidate its place in the
Russian market and gain a foothold internationally. They also hope that their
presence at Skolkovo will assist in that growth.